Question

Financial Reporting Problem: Apple Inc. CT2.1 The financial statements of Apple Inc. are presented in Appendix A. The complete annual report, including the notes to the financial statements, is available at the company's website. Apple's financial statements contain the following selected accounts, stated in millions of dollars. Accounts Payable Cash and Cash Equivalents Accounts Receivable Research and Development Expense Property, Plant, and Equipment tryventories Instructions a. Answer the following questions. 1. What is the increase and decrease side for each account? 2. What is the normal balance for each account? b. Identity the probable other account in the transaction and the effect on that account when: 1. Accounts Receivable is decreased. 2. Accounts Payable is decreased. 3. Inventories are increased c. Identify the other account(s) that ordinarily would be involved when: 1. Research and Development Expense is increased. 2. Property. Plant, and Equipment is increased.

Answer 1

Based on the information available in the question, we can answer as follows:-

Requirement A:-

1.) What is the Increase and decrease side of each account?

Account	Increase side	Decrease side
Accounts Payable	Credit	Debit
Accounts Receivable	Debit	Credit
Property plant & Equipment	Debit	Credit
Cash and cash equivalents	Debit	Credit
Research and development expense	Debit	Credit
Inventories	Debit	Credit

2.) The normal balance of each account is:-

Account	Normal balance
Accounts Payable	Credit
Accounts Receivable	Debit
Property pland & Equipment	Debit
Cash and cash equiavlents	Debit
Research and development expense	Debit
Inventories	Debit

Requirement B:-

The probably account in the transaction and the effect on that account when :-

1.) Accounts receivable is decreased.

The other account in the transaction is Cash. When cash is received on accounts receivable that are due, there is an Increase to the cash account and a decrease to the Accounts receivable balance.

2.) Accounts payable is decreased.

The other account in the transaction is Cash. When cash is paid on accounts payable balance, there is a decrease in the cash account and a decrease to the Accounts payable balance.

3.) Inventories are increased.

The other account in the transaction is cash/Accounts payable based on cash or credit purchases. When inventories are increased, Cash decreases since the cash is paid for the purchase of inventory. If the transaction is a credit transaction, Accounts payable balance increases since the goods were purchased on credit.

Requirement C:-

Identify the other account :-

1.) Research and development expense is increased.

In this scenario, the other account that would be involved is the cash account. The payment of cash for the research and development expenses incurred would reduce the cash account and increase the research and development expenses account.

2.) Property, plant and equipment is increased.

In this scenario, the other account that would be involved is the cash account. The payment of cash for the property, plant and equipment purchased would reduce the cash account and increase the property, plant and equipment account.

KIndly let me know if you have any questions via comments :)